Blog

04/12/17

Practical Economics

There is a battle going on in our house to win the decisive third vote. Our oldest daughter is a social justice advocate who is an art major. Our son is a libertarian getting a finance degree. Were he the type, he might be the first person in the world to get a ‘Creative Destruction Rocks’ tattoo.

Both are after the support of the youngest so they can control the dinner table discussion.

She has been leaning conservative since riding to school with her brother for years, listening together to country music, sound track of the Red State South, but earlier this week, she got her first official paycheck and the fat lady sang. It is over. She firmly joined forces with our son when she looked at her pay stub and shouted, ‘Why is the government taking all of my money?’

Another similar practical economic debate is happening on at a bigger scale around certificate of need (CON) laws, something that goes to the heart of your beliefs about government vs. markets.

These state laws, which require government approval before certain healthcare facilities can be built; certain services added; or certain expensive equipment purchased; were intended to ensure an adequate supply of resources, particularly for rural communities and the poor; improve quality; control costs; and encourage hospital substitutes like ambulatory surgery centers (some of you snickered on that last one).

Were they yet up to speed on healthcare economics (I am working on it), my two youngest would point, victoriously and probably a bit too smugly, at a pile of data suggesting CON laws have had the opposite effects of these stated goals.

We bring this up because West Virginia and Florida have introduced bills to repeal their CON laws. New Hampshire shed theirs last year, bringing to 15 the states that have dropped it since the federal government repealed the CON mandate in 1986.

Positions on this overly complex process (heads nodding vigorously from any readers who have ever had to endure a CON application) essentially comes down to two points of view.

Incumbent hospitals, the primary defenders of CON laws, say that without this protection, greedy capitalist pigs (that is you physicians partnering with some money folks…together, the very definition of the triple redundant ‘greedy capitalistic pig’ phrase) will cherry pick their profitable business and they will then go belly up, leaving no one to take care of Grandma’s gall bladder.

Opponents of these laws claim CON’s restrict innovation and competition, and suggest, none too subtly, that hospitals simply use the CON process to protect their monopolies. And then they point to all that data about higher cost, less access and no improvement in quality.

Speaking of data, states that are exploring the elimination of CON laws generally couple that with increased cost and quality reporting requirements. Increasingly, transparency to aid consumer’s in their decision making is seen as a better form of control than a government approval process.